Bloomberg News

Democrats Focus More on Jobs in Advice to Debt Panel

October 13, 2011

(Updates with proposed financial fee in 15th paragraph.)

Oct. 13 (Bloomberg) -- House Democrats offered guidance to Congress’s deficit-cutting supercommittee that is more focused on raising new revenue and creating jobs than on trimming the federal budget, illustrating the gulf between the two parties.

In a letter to the panel, Minority Leader Nancy Pelosi of California reiterated her party’s call for higher revenue. She said the committee also should consider the portions of President Barack Obama’s $447 billion jobs package designed to help small businesses.

“The American people overwhelmingly agree that significant revenues must be included in any plan,” Pelosi told the co- leaders of the 12-member bipartisan panel. She and other Democratic leaders discussed their plan at a news conference today in Washington.

Tomorrow is the deadline for congressional committees to make recommendations to the supercommittee, which was assigned to create, by Nov. 23, a 10-year plan to cut $1.5 trillion from the federal budget. If the committee becomes deadlocked or Congress doesn’t approve its recommendations by Dec. 23, across- the-board spending cuts of $1.2 trillion are set to take effect beginning in fiscal 2013.

Ranking Democratic members of at least 15 House committees submitted proposals, including ideas rejected by Republicans in previous budget negotiations. The emphasis on jobs in the proposals underscored the Democrats’ shift from Obama’s onetime goal of a “grand bargain” to rein in the debt to a jobs campaign amid the prolonged economic slump.

‘Critically Important’

House Speaker John Boehner, at a separate news conference, said the supercommittee’s work is “critically important.”

“No one expected this to occur without some difficulty,” the Ohio Republican said. “I believe that an outcome and a result is essential to reduce the debt burden on the American people.”

Democrats on the tax-writing Ways and Means Committee urged the supercommittee to consider proposals in Obama’s jobs plan, blocked by the Senate this week, including payroll tax cuts for workers and employers and an extension of unemployment insurance benefits.

In a reference to the supercommittee’s efforts to revise taxes, they said eliminating incentives for domestic manufacturing and research could hurt U.S. jobs and competitiveness.

“Eliminating them in order to lower rates across the board endangers precisely those industries that are in the best position to provide the good jobs that this country needs,” said the letter from Representative Sander Levin of Michigan, the Ways and Means panel’s top Democrat.

Tax Breaks

Republicans have said any new money generated from the tax code should come by lowering rates and eliminating tax breaks in a way that encourages economic growth and generates higher tax receipts. They also say entitlement programs such as Medicare, which drive the long-term debt, must be taken on.

Democrats on the House Energy and Commerce Committee, which has authority over Medicare, proposed no changes to benefits for current or future retirees, saying it was “premature” to offer major health-care changes before Obama’s health-care law and its provisions are fully implemented.

Instead, they proposed lowering drug costs and eliminating waste and fraud in the Medicare system, a measure Republicans and many outside analysts say is insufficient to control long- term costs.

‘Need for Action’

In outlining the “urgent need for action on jobs,” Democrats also said the supercommittee should support an energy manufacturing tax credit to encourage use of renewable energy.

Representative Barney Frank of Massachusetts, senior Democrat on the House Financial Services Committee, urged the debt-cutting panel to impose a fee on the largest financial firms, such as Bank of America Corp. and JPMorgan Chase & Co.

Frank proposed a “risk-based fee” on all financial companies with more than $50 billion in assets and hedge funds with more than $10 billion in assets. Frank also recommended raising money by legalizing and taxing internet gambling and raising the guarantee fees charged by mortgage companies Fannie Mae and Freddie Mac.

The House Democrats didn’t provide cost-savings numbers for their proposals, many of which identified government programs they said shouldn’t be cut.

Defense Cuts

Representative Adam Smith of Washington, the top Democrat on the Armed Services Committee, warned against further cuts to the Pentagon’s budget beyond the roughly $450 billion in reductions already projected over the next decade.

Smith’s position is similar to that of Howard P. “Buck” McKeon, a California Republican and chairman of the Armed Services panel. While McKeon had said he opposes increases in revenue, he would back revenue increases if there were no other way to prevent defense reductions.

Representative Norm Dicks of Washington, who as the ranking Democrat on the House Appropriations Committee helps set program-by-program budgets for agencies, offered no specific ideas for cutting spending.

Instead, his letter outlined his concern about harm to government programs if the panel fails to agree on a plan and sequestration, or an automatic spending cut, takes effect.

“Sequestration will have consequences,” Dicks wrote. “The impact on our nation’s defense and security, economic competitiveness and health, if even one year of sequestration is allowed to take effect, has not been spelled out.”

--With assistance from Laura Litvan, Richard Rubin, Phil Mattingly and Roxana Tiron in Washington. Editors: Laurie Asseo, Don Frederick.

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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